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Retail Inflation heats up

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We have come across many articles about the revival of the Indian economy for the past 2 months but the govt. hasn’t listened to such things and they don’t want to do that as always.

During the last Monetary Policy Committee meeting, RBI has decided not to reduce the repo rate in order to control Inflation. We know that Inflation with increasing growth rate is good for the economy but without growth isn’t.




If the repo rate was reduced we would’ve got inflation with some increased growth rate. But now the growth rate hasn't hiked considerably but the retail inflation hits 4 years high says Consumer Price Index (NSO).

The retail inflation hits 7.35% and the food inflation hits 14% in the month of December. The hike in retail inflation was shared by the telecom operators as their top-up package price was increased and mainly due to the food prices which paid the reason for the hike.

Onion price was nearing ₹180 and it was the most obvious reason. Will the inflation decrease in the month of January? No way, it’s obvious as the prices of food products like oil, pulses, chilli etc were increased in the month of January just because of inflation. Probably we can expect inflation may get reduced in the month of February.

This isn't a healthy thing for the economic growth of India. Industrialists say that the economy may tend to grow in the last quarter of 2019-20 but the inflation tries to affect it. Many economists say that there is a problem in the supply side and so, the govt should take care of it. They were lying about the situation as many problems lie with the demand side. There is a global slowdown just because of the reduced aggregate demand not because of reduced supply. And finally, in India, the problem is only on the demand side.

The economy has less cash flow, people don’t have money in their hands that reduces the demand. The problem with NDA govt is their policies are so capitalistic and that’s why small scale industries and unorganised sector are affected much. What they say is that we have created MUDRA scheme and the startup India program are just to increase the small scale industries in India. But the numbers and result say many NPAs are due to MUDRA loans and many startups are loss-making.

We didn't know what is going to happen for automobile sales for the next two months. In the month of March, all the vehicles should be switched to BS6 model, so the automobile companies will dump all BS4 model vehicles for the offer price and they revive the slowdown or people might wait for BS6 model vehicles and further slow down the economy. Let’s see what is going to happen.

Now let’s wait for the 2020 budget and see what the govt has decided to revive the Indian economy and reduce inflation. I strongly believe that the govt will neither try to give a solution for the demand side nor give concession for the small scale industries which will make India grow faster. They only think about corporates and make the Indian economy stagnant.

Read the previous post for better understanding - click here


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